Shares in Westpac Banking Corp (ASX: WBC) are shifting higher on Thursday as the company shrugs off reports it will be fined $12 million for overcharging customers on credit card interest rates.
At the time of writing, the Westpac share price is $24.64, up 1.13% on the day. It raced to these levels in early trade and has held the line since.
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What happened to Westpac today?
Recall that the Australian Securities and Investment Commission (ASIC) began proceedings against Westpac in November last year. In total, the regulator launched six actions against the bank, and today's outcome resolves just one of those.
The Federal Court has found that Westpac charged customers interest rates higher than it was contractually allowed to and then onsold this debt to institutional fixed-income investors.
As a result of the conduct, ASIC alleged that more than 16,000 Westpac customers – who were allegedly already in financial distress – were likely impacted.
Justice Jonathan Beach of the Federal Court handed down his judgment and was unreserved in his assessment findings.
"Undoubtedly, the customers impacted by Westpac's conduct were likely to be customers who could least afford to be overcharged with interest and who faced financial hardship. Clearly, the extended consequences of Westpac contraventions were serious to say the least," he said, cited by Business News Australia.
"It appears that the contraventions were not brought about by deliberate or reckless conduct on the part of Westpac and they were not commercially motivated.
"The $12 million penalty reflects the seriousness and impact of the contraventions on a large number of vulnerable consumers."
Not just today
The finding builds on the Federal Court ordering Westpac to pay a separate $20 million earlier this month for incorrect insurance charges. The Westpac share price ended that day almost flat.
Just prior to that, the bank was ordered to pay $1.5 million for misleading consumers with both credit card and insurance policies.
As ASIC reported on 7 April:
The Federal Court has ordered Westpac Banking Corporation pay a $1.5 million penalty for mis-selling consumer credit insurance with its credit cards and Flexi Loans to customers who had not agreed to buy insurance policies.
ASIC has identified consumer credit insurance to be a poor value product that leads to poor outcomes for consumers. In this case, customers were charged for insurance policies they had not agreed to buy and therefore were unlikely to use. The sale of these products benefitted the bank and not the consumer.
Westpac share price snapshot
The Westpac share price has soared to a 15% gain this year to date. It is also up 4% over the past month.
However, it has fallen 2.4% into the red over the past year.
